Chiding certain entities for parking liquidity in risk-free government papers, the central bank Monday said the country''''s non-financial corporate sector had an investment potential of more than Rs 3.7 trillion. "It has been noted that some entities have parked their liquidity in Treasury Bills and Pakistan Investment Bonds," said SBP''''s Chief Economic Adviser Dr Saeed Ahmed while talking on "Taking Economic Recovery to the Next Level: Role of the Private Sector" at Pakistan Stock Exchange (PSX).
Making what Chairman PSX Munir Kamal said history, the Governor State Bank of Pakistan (SBP) Ashraf Mahmood Wathra was chief guest at the gathering which saw the country''''s top corporate leaders in attendance. "This is disturbing as the corporate sector is looking to benefit from investing in risk-free government securities, instead of investing in real economic activities," said Dr Ahmed.
Earlier, Governor SBP also referred to the trend while citing a recent analysis of non-financial companies listed at the stock exchange. "Overall the corporate sector is fairly liquid and possesses a healthy surplus of investable funds," he told the audience. In a detailed presentation, the SBP''''s chief economic adviser said it was high time for corporate sector to move from stabilisation to growth and lead the economic recovery. The non-financial corporate sector, he said, had witnessed gradual deleveraging since 2009 amid improved liquidity condition.
"The most conservative estimate of Net Surplus with the corporate sector is Rs 446 billion [calculated as current assets net of current liabilities, without additional borrowing]," he said. The SBP official said the potential investible resources of the non-financial corporate sector which when deployed could increase investment in the country significantly and contribute in economic growth and job creation. The total investible resource, defined as twice the size of equity (based on assumption of debt-equity ratio of 2) with short-term investments, cash and near cash and excluding the total liabilities, turns out to be over Rs 2.6 trillion, he said.
"More than half of this potential lies in the energy sector alone," Dr Ahmed said. Some other major sectors include cement, textiles and autos. Another definition of computing potential investible resources which replaces total liabilities with total borrowings, he said, this potential reached over Rs 3.7 trillion with major sectors remaining the same.
"With the shift in policy focus from stabilisation to growth, healthy corporate balance sheets along with historic low interest rates and marked improvement in security condition, offer a golden opportunity to promote investment in the country," he said.
The corporate sector, he said, was now well-positioned to lead the economic recovery and take it to the next level. "The growth dynamism has to come from private sector if we have to catch up with the developed world," said the advisor. SBP Governor Wathra said it was an opportune time to accelerate domestic investment in the country to take it to the next level of robust high growth.
"In the context of historically low interest rates, marked improvement in security conditions and energy supplies, and launch of CPEC-related initiatives, this is an opportune time to invest in new projects," he said. Referring to recent gains in economic performance, the governor said the economy had shown marked recovery during last two fiscal years, growing by over 4 percent, after an anaemic rate of 2.8 percent on average in the preceding five years.
He said macroeconomic stability had been the key feature of this recovery with budget deficits being contained without compromising on indispensable public spending; adequate level of foreign exchange buffers built up crossing $20 billion for the first time and inflation and inflationary expectations less likely to resurge anytime soon. "What this tells us is that no major risks are in sight, which would undermine efforts in meeting our shared objective of achieving high growth; generating more jobs; and move further ahead on the development frontier," the governor said.
Terming the maturing of capital markets as a welcome sign for private sector, Wathra said with the advent of unified PSX there was now a deep liquidity pool and national platform for domestic savers and investors to take advantage of. "For their part, corporate entities can benefit from enhanced access to savings, which can be channelled into new projects and developmental activities. The integration facilitates regulators in monitoring of market activity, and allows a greater degree of efficiency and transparency to be realised," he said. Earlier, Chairman PSX Munir Kamal said: "This is the first time in the history of stock exchange in the country that the Governor of State Bank has been invited to the gong ceremony of the stock exchange".